Although coffee is one of the most lucrative agricultural industries in Uganda, the current value chain leaves farmers with less than 2 percent of the retail value, with most trapped in poverty. Through a transition to the “farmer ownership model”, which removes middlemen and increases the value farmers’ retain, Joseph Nkandu is combating the poverty cycle for Ugandan coffee farmers and increasing the overall return for one of the country’s primary exports.

Problem

Coffee sales accounted for close to 30 percent of Uganda’s export revenue in 2012. Although its contribution to export revenue has dropped since the 1990s, coffee continues to be the country’s most important agricultural commodity. 80 percent of Uganda’s workforce is employed in the agricultural sector and the coffee sector alone employs over 3.5 million people (10 percent of Uganda’s population) on approximately half a million smallholder farms. However, despite the size and importance of this sector, most Ugandan coffee farmers cannot afford to fully process and add value to their coffee. They therefore end up selling raw commodity coffee to intermediaries, leading to the fact that these farmers continue to grapple with crippling poverty and live on less than $2 a day.

Idea

Joseph founded NUCAFE, a social entrepreneurial farmer-owned organization that delivers high-end services to over 1.5 million smallholder coffee farmers within more than 200 rural community farmer associations and cooperatives. It uses a hybrid business model, The Farmers Ownership Model, which empowers farmers collectively and individually to assume as many roles and functions along the value chain in order to facilitate better returns on investment. By unlocking opportunities for farmers to engage at higher levels of the value chain, Joseph is not only increasing their incomes but challenging and reshaping the power relations in this industry. As part of this model, instead of buying raw produce from farmers at low prices to resell, coffee processors offer their expertise and facilities to farmers for a fee. In doing so, processors enjoy higher operational capacity and increased revenue. This value addition also allows farmers to retain ownership of a more valuable form of coffee, which earns a higher return on the market.

Business model

NUCAFE earns service fees from processing and marketing coffee. This has enabled it to pass from 70% grant income (US$38,395) and 30% earned income (US$16,459) in 2010 to 26% grant income (US$380,404) and earned income 74% (US$1,108,985) in 2016.

Scaling

By working with Santa Clara University's Miller Center for Social Entrepreneurship, Joseph is developing and transforming the farmer ownership model into a certification scheme ready for accreditation, franchising, training and policy reforms. As the model is developed into a certification scheme, Joseph will create teams of fellows that will in addition to their enterprises help in carrying out policy advocacy to governments to adopt the model in the public policies.

Impact

Social impact

Over 1 million coffee farmers are now organized in 200 associations, and over 1000 farmer leaders have entrepreneurial skills. 5956 direct jobs have been created, of which 2915 amongst youth. NUCAFE increases farmers’ income per kilogram by at least 250%, leading to farmers earning at least US$5 per day. Furthermore, farmers' yields have risen by 30%, and private and farmer owned factories process coffee at 95% operating capacity from less than 40% in 2005.

Environmental Impact

10% of the coops are certified organic, Utz, fair-trade and 4C, with 50,000 families that have become climate smart.